Probability of Firm Expropriation Modeling
4 Pages Posted: 3 Aug 2017
Date Written: July 28, 2017
This article presents a dynamic equilibrium model of firm valuation under the risk of expropriation. It was determined that equilibrium weighted average value of capital of such firm should be increased by the probability of expropriation. There has proposed a model that determines the probability of firm expropriation under the conditions of indifference between the capture of the company and monthly payments for the "protection service" to a high-ranking racketeer.
Keywords: risk of expropriation, probability of expropriation, firm valuation, racketeering
JEL Classification: D19, D21, D46, D72, G12, G31
Suggested Citation: Suggested Citation